Inheritance Tax and pensions: helping members and their loved ones navigate the changes
Pensions & benefits DB member engagement and communication DC member engagement and communication Pensions tax DC pensions Policy & regulation
From 6 April 2027, most defined contribution (DC) pension pots will generally be included in the value of a member’s estate for Inheritance Tax (IHT) purposes. The IHT changes also apply to certain other pension scheme death benefits, including some defined benefit (DB) lump sums.
The implications extend beyond tax, affecting how administrators handle death benefits, the decisions members make and the support their families need. They also bring renewed attention to Expression of Wish forms, as beneficiary nominations are set to become a more prominent measure of member engagement under the proposed Value for Money framework.
For scheme trustees and pension managers, this creates a communications challenge that goes beyond explaining a change in tax rules. The challenges will depend on each scheme’s benefits and processes, particularly where death benefits differ between active and deferred members. Members may already struggle to engage with or understand these benefits, making it harder to put the changes into context. A newsletter article can introduce the changes, but will members understand what they mean for their own benefits? Will they recognise why it is important to review their Expression of Wish forms, or know what their family may need to do when they die?
One employer, two Expression of Wish forms
An employee in a DC pension scheme often has two or more lump sum benefits payable on death: a scheme benefit, the return of their DC pension pot and an insured death-in-service lump sum. Although both are linked to the same employment, they may be provided through different arrangements.
The insured death-in-service lump sum might be held under a separate trust. The employer may ask the employee to complete an Expression of Wish form for this benefit. Their DC pension pot, however, might be held with a Group Personal Pension (GPP) provider, a master trust or the employer’s own trust-based scheme with its own process for recording the member’s wishes.
It is easy to see how someone could assume that completing one form covers both benefits. In reality, the forms may be managed by different organisations, accessed through different systems and need to be updated separately.
In addition, the two lump sum benefits will now be subject to different tax treatment. Generally, only the DC pension pot will be included in the value of the member’s estate for IHT purposes. The multiple of salary death-in-service benefit will normally be excluded from IHT. This all adds complexity to members’ decision-making and may discourage them from taking action. It could compound the longstanding challenge of encouraging members to complete Expression of Wish forms (with completion rates across pension schemes already very low).
An opportunity to review communications
This is a timely opportunity to address potential confusion. It also offers a chance to review the wider member journey. Rather than simply asking members to review their Expression of Wish forms, communications can help them understand which benefits they have and whether they need to take action in more than one place.
Small changes to existing communications can help make that connection. For example, a prompt on the insured multiple of salary death-in-service lump sum Expression of Wish form could remind members that their DC pension pot has a separate process, with a link to their pension provider. The same message could appear in reverse on the DC pension pot Expression of Wish form. Coordinated reminders through the employer and pension provider would reinforce the message and make both actions easier to complete.
A wider communications campaign would help explain why reviewing Expression of Wish forms is worthwhile, what members can do and where they can find further information, without suggesting that everyone needs to change their plans. Many members will not have an IHT liability, and the outcome will depend on their wider estate, available reliefs and allowances, and individual circumstances. Government statistics show that just under 5% of UK deaths resulted in an Inheritance Tax (IHT) charge in the 2023/24 tax year.
These campaigns should also consider all members who have reached their target or normal retirement age and who have not accessed their DC pension pot. Some of these members may have been preserving their pension to pass on wealth, rather than fund retirement. These members could receive more targeted communications, prompting them to understand the changes, review their Expression of Wish forms and consider whether financial advice would help.
Trustees and pensions managers could also encourage members to keep a secure record of their pension arrangements and tell someone where to find it, helping loved ones know which schemes and providers to contact in the event of their death.
Expression of Wish forms also have a wider governance relevance
The July 2026 DWP consultation on the new UK Value for Money framework retains a proposed standalone engagement metric: the percentage of savers who have nominated a beneficiary.
This creates a useful connection between preparing for the IHT changes and reviewing how effectively schemes help members take practical action. To help improve low completion rates, these are some key metrics for trustees and pensions managers to monitor:
- Differences between active and deferred member response rate.
- How many members abandon the online process before submitting.
- Whether members with multiple nomination processes complete all the relevant steps.
- The questions received by administrators and contact centres.
- Whether members understand the distinction between recording their wishes and the eventual tax treatment.
- Which types of communication campaigns (for example videos, email nudges, member stories) see the highest increase in Expression of Wish completion rates.
These metrics can help identify whether the obstacle is awareness, understanding, access or the process itself.
Supporting families through estate administration
It will also be important to consider another key audience, the people who may need to deal with the member’s benefits after their death.
For a bereaved family or personal representative, the process will become more complex, potentially involving several organisations, unfamiliar terminology and requests for information from different providers. Coordinating these steps within the required timescales could add further pressure at an already difficult time.
A tailored scheme bereavement guide could explain who to contact, what information the scheme may need, what information it can provide and what happens next. It could set out what families should expect from the administrator or provider, what they need to do themselves and where to go if they have questions.
A simple checklist could summarise key actions and timescales including establishing the benefits payable, obtaining the relevant information for estate administration and progressing the payment of benefits.
Good bereavement communications cannot remove every administrative difficulty, but they can make the process more understandable and reduce uncertainty at a difficult time.
Next steps
A useful starting point is to map the journey for members and their beneficiaries: which benefits are affected from April 2027, how nominations are made, who is responsible at each stage and what information families will need.
This can help identify gaps and focus communications on practical support making it easier for members to record their wishes and for their loved ones to understand what happens next.
At LCP we have been working with clients to help them prepare for the IHT changes . Drawing on the preparation work we are undertaking for the schemes we administer, including reviews of benefits, processes, member communications and trustee policies, we can share practical ideas and provide tailored support.
